Excise duty on freight

[Guest]

Dear Experts

We are the manufacturer of liquid chemical and due to shortage of tankers in market ,we have made own 5-6 tankers to deliver the material to our party. Mostly we are supplying our material to govt/semi Govt. Units. According to Purchase order we are charging freight and raising freight invoice separately with the material invoice .

So we booked the transportation income in our balance sheet . Now Excise audit team audited our account and raising a quarry that transportation income is a part of your goods value and excise duty will be payable @12.36 % on Transportation income .

Please advice on this issue .

[YAGAY andSUN]

Dear Ravindra,

It seems that C.E. Audit Team is not aware of the settled legal position on inclusion of freight to the assessable value for calculation of Central Excise Duty. Please bring the following judgments in the knowledge of Central Excise Audit Team, namely:-

Addition of the freight charges to the assessable value – Revenue was of the view that the assessees are recovering the freight by issue of debit notes separately and the freight is mentioned in the invoice separately – Held that:- Following CCE, Noida vs. Accurate Meters Ltd. [2009 (3) TMI 1 - SUPREME COURT ] – The freight charges are not part of assessable value of the goods – Assessee contended that the transportation of the goods to the place of their customer is not a condition for sale - It is in some cases where the customer making a request for delivery, the appellants arranged transport and recovered transportation charges as agreed by the customer - order set aside – Decided in favour of Assessee. 2013 (12) TMI 683 - CESTAT MUMBAI, NATIONAL PEROXIDE LTD Versus COMMISSIONER OF CENTRAL EXCISE, Other Citation: 2013 (298) E.L.T. 423 (Tri. - Mumbai)= 2013 (12) TMI 683 - CESTAT MUMBAI

Inclusion of differential freight charges - Held that:- even if the appellant make profit from their activity of arranging transport by charging higher amount than the expenses actually incurred on transportation, the differential freight would not be includible in the assessable value and in this regard, the Apex Court judgment in the case of Baroda Electric Meter [1997 (7) TMI 126 - SUPREME COURT OF INDIA] would be applicable. - Decided in favour of assessee.

Valuation of goods - Inclusion of freight charges - Whether equalized freight separately charged to be included in the assessable value in case of sale on FOR destination basis for the period from July, 2000 to February, 2003 - Held that:- cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value even though cost of transportation has been calculated on average basis and not on actual basis. Same finding was reflected by the Tribunal in the case of Majestic Auto Ltd. cited [2003 (6) TMI 114 - CESTAT, NEW DELHI]. We have also perused board's circular wherein it has been stated that the deductions are permissible only for the actual cost so collected from his buyers - Decided against Revenue.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Inclusion of freight in assessable value: separately invoiced freight and mark ups are not part of excisable value. Established authority holds that separately invoiced freight, including any mark up or averaged destination freight charged to customers, is not includible in the assessable value for excise duty where transportation is not a condition of sale and freight is billed distinctly; therefore transportation income booked separately should not attract excise duty.